1 AUGUST 2018 1H18 results and strategic progress update Half year ended 30 June 2018 1 Results Presentation August 2018
Introduction Chris Weston CEO 2 Results Presentation August 2018
Agenda Headlines 1H18 results review Strategic priorities Financial performance drivers Closing remarks 3 Results Presentation August 2018
Headlines Financial results Encouraging H1 results Full year guidance unchanged Strategic progress Our 2015 strategy has evolved to reflect changing markets Execution of our strategy has strengthened the Group’s foundations and is beginning to drive growth Detailed plans, focused on operating margin and capital efficiency and supported by cost savings of £50m, to deliver improved financial returns We expect to deliver ROCE in the mid teens in 2020, with potential for further improvement thereafter 4 Results Presentation August 2018
1H18 results review Heath Drewett CFO 5 Results Presentation August 2018
Group summary Encouraging H1 results Good underlying growth Movement in revenue and operating CHANGE excluding profit pass-through £m fuel and pre-2017 exceptional items 1H18 1H17 CHANGE currency No exceptional items in Revenue 857 779 10% 14% 2018 (2017: £10m) Operating profit 76 79 (4)% 8% Net interest expense (17) (16) (8)% Effective tax rate of 31% Profit before tax 59 63 (7)% Dividend in line with 2017 Taxation (18) (18) - Profit after tax 41 45 (10)% Diluted earnings per share 15.85 17.88 (11)% Dividend per share 9.38 9.38 - Operating margin 9% 10% (1)pp ROCE 11% 12% (1)pp 6 Results Presentation August 2018
Rental Solutions Strong growth and improved margins Business Movement performance CHANGE excluding 1H18 1H17 CHANGE pre- 2017 exceptional items currency Revenue (£m) 386 307 26% 32% REVENUE Operating profit (£m) 40 14 169% 192% (% OF GROUP excl. pass-through fuel) Operating margin 11% 5% 50 % ROCE (rolling 12 month) 16% 8% Fleet capital expenditure (£m) 26 24 UTILISATION % REVENUE BY SECTOR 1H18 at 30 June (MW) Business services & construction 19 % 1H18 61% Petrochemical & refining 17 % Oil & Gas 12 % 1H17 52% Utilities 11 % Events 9 % Manufacturing 7 % Mining 5 % Other 20 % 7 Results Presentation August 2018
Power Solutions Industrial Profit impacted by Middle East headwinds Business Movement performance CHANGE excluding 1H18 1H17 CHANGE pre- 2017 exceptional items currency Revenue (£m) 219 212 3% 15% REVENUE Operating profit (£m) 23 31 (24)% (15)% (% OF GROUP excl. pass-through fuel) Operating margin 11% 14% 29 % ROCE (rolling 12 months) 10% 10% Fleet capital expenditure (£m) 27 14 UTILISATION % REVENUE BY SECTOR 1H18 at 30 June (MW) Oil & Gas 39 % 1H18 70% Events 16 % Mining 11 % 1H17 69% Business services & construction 10 % Utilities 8 % Manufacturing 7 % Petrochemical & refining 2 % Other 7 % 8 Results Presentation August 2018
Power Solutions Utility Performance reflects known contract off-hires Business Movement performance CHANGE excluding pass- pre- 2017 exceptional items & through fuel 1H18 1H17 CHANGE excluding pass-through fuel and currency REVENUE Revenue (£m) 163 218 (25)% (15)% (% OF GROUP excl. pass-through fuel) Operating profit (£m) 14 36 (62)% (55)% 21 % Operating margin 8% 17% ROCE 7% 16% Fleet capital expenditure (£m) 34 77 UTILISATION This segment now includes only Utility customer projects at 30 June (MW) 1H18 65% 1H17 75% 9 Results Presentation August 2018
Cash flow £m 1H18 1H17 Working capital outflow of £68m EBITDA 224 230 Working capital (68) (51) Capital expenditure reduced by Cash flows relating to prior period exceptionals (4) (10) £33m as we increase our focus on Other 8 15 utilisation Operating cash flow 160 184 Tax (33) (33) Net debt/EBITDA of 1.4x Net interest (18) (17) Acquisitions (33) (28) Purchase of fixed assets (95) (128) Other fixed asset movements - 4 Free cash flow (19) (18) Dividends (45) (45) Changes in equity (7) - Net cash flow (71) (63) Exchange (18) 29 Movement in net debt (89) (34) Net debt (741) (683) 10 Results Presentation August 2018
Working capital performance In recent periods WORKING CAPITAL BREAKDOWN (£m) receivables have been 1,000 the key driver, with £770m 800 £736m £740m £656m some improvement in 600 payables 400 £247m £244m £238m £232m 200 0 FY16 FY17 H118 H117 -200 £(299)m -400 £(346)m £(361)m £(410)m -600 Inventory Receivables Payables 11 Results Presentation August 2018
Actions in place to tackle receivables Power Solutions Rental Solutions Monthly cash collection targets by region (and Monthly billing and collection targets by customer on major projects) region Augmented and structured stakeholder Regular execution review of top debtors engagement and unbilled accounts to agree remedial actions Sales agent effectiveness measured and changes made Temporary resources added to clear unbilled backlog and support collections New regional senior positions created (above project managers) to increase focus and provide escalation path Tighter enforcement of contract provisions, including application of late payment penalties 12 Results Presentation August 2018
Utility – Invoicing/receipts performance Improving performance as our actions begin to take effect POWER SOLUTIONS UTILITY ($m) 90 80 70 60 Invoicing 50 Receipts 40 30 20 10 0 Jan Feb Mar Apr May Jun 2018 13 Results Presentation August 2018
Rental Solutions – Trade receivables performance Steady improvement since the close of 2017 Month by month TRADE RECEIVABLES – INCLUDING UNBILLED ($m) improvement across 300 30% Trade receivables/revenue % Rental Solutions, with 250 25% improved collections making inroads into 200 20% the overall trade 150 15% receivables position 100 10% 50 5% 0 0% H117 FY17 Jan Feb Mar Apr May Jun 2018 14 Results Presentation August 2018
Inventory The next area of focus Power Solutions Rental Solutions Clear target to reduce inventory levels in 2018 Recently begun inventory system regional roll-out Central team established to review and System automation of stock categorisation (9 box approve all new orders (to confirm the ‘need’) definitions: fast moving, slow moving, non moving etc.) to enable greater visibility and support Safety stock levels set by the central team inventory sharing Identification and movement of excess Creation of virtual inventory sharing warehouse for inventory across the regions to meet business depots/regions to identify stock availability prior to needs placing new orders Centrally managed global buyback procedure Consignment stock arrangement established with with key suppliers key supplier Regular stock counts and write-off reviews Scrappage/third party sale process for surplus items, where no supplier buyback option exists 15 Results Presentation August 2018
On track to deliver our 2018 guidance Growth in Rental Solutions and Industrial expected to offset Utility headwinds in the full year Expected effective tax rate of 31% Full year fleet capex down c.10% on prior year Working capital improves to small inflow in H2 Net debt/EBITDA to reduce to 1.2 – 1.3x 2018 PBT expected to be in line with 2017, excluding currency effects 16 Results Presentation August 2018
Strategic priorities Chris Weston CEO 17 Results Presentation August 2018
2015 strategic priorities: A reminder CUSTOMER Priority • Tailor sales and service channels • Focus on key sectors • Pursue adjacencies • Evaluate bolt-on M&A opportunities TECHNOLOGY Priority • Work with our strategic partners to develop market leading products • Strengthen and expand strategic partnerships • Reduce the overall cost of power for our customers EFFICIENCY Priority • Streamlining our cost base • Optimising deployment of resources • Improving processes and systems 18 Results Presentation August 2018
Group performance held back We have faced significant challenges as we have executed our strategy NEGATIVE DRIVERS OPERATING PROFIT (£m) 350 Repricing and off-hires of legacy Utility contracts 300 Customer liquidity increasing 250 outstanding receivables 200 Impact of oil price fall on North American oil & gas sector 150 100 50 0 2014 2017 Rental Industrial Utility 19 Results Presentation August 2018
Reviewing our strategy Comprehensive, business led exercise, supported by external consultants Progress in the strategic priorities has built a firm foundation and is beginning to drive growth Re-examined our strategy, the markets we operate in and the impact of renewables and storage Markets have evolved and our strategy has evolved with them Implementing detailed plans for the continued execution of the strategy Determined revised financial expectations 20 Results Presentation August 2018
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